RBI sets up committee to review financial benchmarks

Moneycontrol Bureau

The Reserve Bank of India (RBI) has formed a committee to study various issues related to financial benchmarks. In order to keep abreast with the international standards, the central bank feels the need to review the process of computation and dissemination of major financial benchmarks in India.

"Study all major financial benchmarks in India with a view to assessing their current relevance/usage, fallback mechanisms in place in the event of benchmark being rendered obsolete and suggest changes, if any, for inclusion of new benchmarks or exclusion of some of the existing benchmarks," RBI said in a release issued on Friday.

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The committee has been directed to submit its report latest by December 31, 2013. It will study international experience in addressing issues relating to benchmarks and draw suitable lessons to the Indian context.

The committee has also got the mandate to examine the governance mechanisms within the organizations computing the benchmarks with a view to assessing conflicts and enhancing transparency.

"Examine the need for regulators’ involvement in computation and dissemination of benchmarks and if so, advise on appropriate systems and processes therefore. Suggest suitable mechanisms for dealing with transition issue arising out of legacy conctracts in the event of markets shifting to a new benchmark," said the terms of reference of the committee.

Finally, the committee will propose a system of supervision in respect of institutions involved in computing/disseminating the benchmarks.